Mortgage rates are on the rise this year, but they’re still incredibly low compared to the historic average. However, anytime there’s a change in mortgage rate, it affects what you can afford to borrow when you’re buying a home.
When buying a home, it’s important to determine a monthly budget so you can plan for and understand what you can afford. However, when you need to stick to your budget, even a small increase in mortgage rate can make a big difference. Every time the mortgage rate increases, your loan amount has to decrease to keep your monthly cost in range. This means you may have to look for lower-priced homes as mortgage rates go up if you want to be able to maintain your budget.
In essence, it’s ideal to close on a home loan when mortgage rates are low, so you can afford to borrow more money. This gives you more purchasing power when you buy a home. Mark Fleming, Chief Economist at First American, explains, “Monthly payments have remained manageable despite soaring home prices because of low mortgage rates. In fact, monthly payments remain below the $1,250 to $1,260 range that we saw in both fall 2018 and spring 2019, but they are on track to hit that level this spring. Although they remain low, mortgage rates have begun to increase and are expected to rise further later in the year, thus affordability will test buyer demand in the months ahead and likely help slow the pace of price growth.”
Thanks to low mortgage rates, the spring housing market is in bloom for buyers – but these favorable conditions may not last for long. Contact your local real estate professional today to start the homebuying process while your purchasing power is still holding strong.
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